Help from a Insider Trading Attorney
While the SEC’s Enforcement Program’s priorities change over time (for example its relatively recent crackdown in the digital assets space), the one constant is its commitment to aggressively investigate and prosecute insider trading. This is clearly evidenced by the spate of insider trading cases recently announced by the SEC.
One such case involved the filing of settled litigation against a former manager at Nutanix, Inc. (Nutanix). The SEC’s order found that the manager liquidated his Nutanix stock and traded Nutanix options based upon material, non-public information he obtained through his employment prior to the company’s February 2019 quarterly earnings announcement.
Per the SEC’s Order, the manager learned that Nutanix’s financial situation had deteriorated during its second fiscal quarter and that, as a result, it was putting in place financial austerity measures, including hiring and salary freezes. Within a week before Nutanix’s earnings announcement, the manager sold over 7,000 shares of its stock and engaged in options transactions designed to profit from the anticipated stock drop. When Nutanix publicly released its earnings, its stock price plummeted over 32% the next trading day. The manager profited handsomely, reaping approximately $293,000 in profits and loss avoidance from his illegal insider trading.
With neither admitting nor denying the insider trading charges, the manager agreed to settle on the basis that he violated the anti-fraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and agreed to pay approximately $585,000. The settlement’s financial component was standard for an insider trading SEC settlement, with the payment of disgorgement (the return of the illegal profit made and/ or loss avoided) of $293,000, along with prejudgment interest, and a one-time civil penalty of the same amount, thus totaling the approximate $585,000.
The manager, as a corporate insider with access to material, internal financial information, coupled with his close-in-time trades relative to the earnings announcement, including his use of options, all supported what proved to be a very strong circumstantial case for the SEC which, not surprisingly, resulted in a settlement prior to litigation.
Illegal insider trading – the SEC’s long-standing and firmly entrenched enforcement priority — no doubt remains solidly in place and, arguably, may now be more critical than ever.
Contact SEC Defense Attorney David Chase, Esq.
David Chase, Esq. of the Law Firm of David R. Chase, a former SEC prosecutor, is now an SEC defense attorney and represents individuals in SEC insider trading investigations nationwide. You may contact him toll-free at: 800-760-0912 or e-mail at: firstname.lastname@example.org, and can visit the Firm’s website for more information and content at: www.davidchaselaw.com.